Development and Application of a Needs-based Methodology for Calculating a Capitation Rate for a Comprehensive Health Organization

S Birch, S Chambers, J Eyles, Jeremiah Hurley and B Hutchison

No 1990-13, Centre for Health Economics and Policy Analysis Working Paper Series from Centre for Health Economics and Policy Analysis (CHEPA), McMaster University, Hamilton, Canada

Abstract: In this study we develop a methodology for calculating a capitation rate for a Comprehensive Health Organization (CHO). We apply the methodology to the population served by the proposed Fort Frances CHO. The methods of calculating capitation rates used currently by the Ontario Ministry of Health to determine funding levels of Health Service Organizations (HSOs), as well as the methods proposed for calculating CHO capitation rates, are critically reviewed. Both approaches base the calculated capitation rates on the current, or past, levels of health-care utilization, which perpetuate any existing inequalities in access to health care in the province. The methodology developed in this study has the health-care needs of the study population, as distinct from the health-care use of patients, as its focus. We argue that this needs-based approach is consistent with the philosophy of the Canada Health Act (1984) and encompasses aspects of both efficiency and equity in the allocation of health-care resources. Studies on population characteristics which correlate with health status and risks to health are reviewed, as is the literature on population-based planning of health-care resources. The strengths and weaknesses of potential indicators of health-care needs are evaluated. A profile of the study population is constructed, using data from the national census and other sources, which is compared with a corresponding profile of the provincial population. Particular features of the study population are identified as factors giving rise to atypical levels of need for health care. On the basis of the literature review, the standardized mortality ratio (SMR) is used as the best available indicator of need for most programmes.

Date: 1990
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